Fortnightly - AECIhttps://www.fortnightly.com/tags/aeci
enInvoice Enclosedhttps://www.fortnightly.com/fortnightly/2014/03/invoice-enclosed
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p class="p1"><span style="line-height: 1.538em;">Having lost Entergy to MISO, the Southwest Power Pool seeks its pound of flesh.</span></p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Bruce W. Radford</p>
</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><span class="s1"><b>Bruce W. Radford</b></span> is publisher of <span class="s2"><i>Public Utilities Fortnightly</i></span>. Contact him at <a href="mailto:radford@pur.com">radford@pur.com</a>.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - March 2014</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Recently we witnessed history being made, but we don't know exactly when it happened.</p>
<p>It was January, certainly. Maybe the 10th, or maybe a day earlier.</p>
<p>That's when the Southwest Power Pool, in one of the most brazen moves yet seen in the power industry, dropped a single invoice in the mail: an invoice accompanied by a letter from its Chief Operating Officer Carl Monroe that, while perfectly cordial in tone ("Dear Richard," it begins), was sent nevertheless without a date affixed to it.</p>
<p>Was it the excitement of the moment? Very likely so, as this invoice surely marks a turning point for the power industry.</p>
<p>For it purports to bill MISO, the Midcontinent Independent System Operator, for some $2.4 million (including $1 million in penalties) that SPP claims are due and owing for the last two weeks of 2013, as compensation for uninvited, rogue power flows that it says MISO has loosed upon the SPP regional grid, as a consequence of Entergy's integration into the MISO footprint on December 19. Specifically, the six Entergy operating utilities - which SPP itself had once courted as potential members, before it was spurned - joined MISO and thereby formed what is now the nation's largest regional transmission organization, stretching from Manitoba all the way south to the Gulf of Mexico.</p>
<p>Welcome to the age of RTO competition: region vs. region, grid vs. grid. It could well outdo the choice wars between retail energy suppliers that we thought were in our future.</p>
<p>On January 30, in a second and separate invoice<i>,</i> SPP demanded another $6.9 million, covering that month's charges. No doubt we'll see more.</p>
<p>To understand the full intensity of this fight, let's turn to the parties themselves. Listen first to SPP, impugning MISO's daring reliance on its pitifully weak 1,000-MW physical tie to the Entergy system to achieve a market dispatch to serve Entergy's 27,000 MW of load - a gambit that SPP argues was known all along to be impossible, without the availability of additional physical transmission paths over SPP's lines, to catch and funnel the overflow:</p>
<p>"MISO's free, unlimited use of SPP's transmission system to serve the vast incremental load of the Entergy operating companies can no longer be found just, reasonable, and not unduly discriminatory... It makes no sense for all of the other users ... to have to pick up the tab." <i>(Complaint of Southwest Power Pool, pp. 6-7, FERC Dkt. EL14-21, filed Jan. 28, 2014.)</i></p>
<p>But now comes MISO, which, while not denying the existence of Entergy-bound power flows spreading across neighboring grids, has nevertheless rejected all attempts to bill for these affronts as <i>ultra vires:</i> unsupported in law or regulation, either by SPP's open-access transmission tariff (OATT), or by the Joint Operating Agreement (JOA) signed between the two RTOs, which was approved by the Federal Energy Regulatory Commission back in 2005. MISO says the JOA grants it a right to share SPP line capacity to complete its market dispatch of resources to the Entergy companies, as long as that sharing doesn't threaten SPP's reliability or firm schedules.</p>
<p>Listen, if you will, to MISO's reply to the SPP complaint:</p>
<p>"Now that the integration [of Entergy] has been successful, SPP seeks to charge MISO for point-to-point transmission service and unreserved use on the SPP transmission system ... even though there is no provision in the SPP Tariff or the JOA that permits such a charge.</p>
<p>"SPP is seeking to extract dollars from MISO customers to enrich its transmission owners." <i>(Answer of MISO, pp. 3-4, FERC Dkt. EL14-21, filed Feb. 18, 2014.)</i></p>
<p>But what of those caught in the middle?</p>
<p>Xcel Energy, which owns utility subsidiaries in both RTOs (Southwestern Public Service, in SPP, and Northern States Power, in MISO), rose quickly to the latter's defense:</p>
<p>"SPP variously characterizes the MISO market flows at issue as 'unfettered,' unilateral' or 'unlimited'... These assertions do not appear to be grounded in the facts."</p>
<p>TVA and the Southern Company, though not members of SPP, nevertheless fear that their grids, too, could become unintended hosts of MISO's power overflows. If compensation is due, they argue, it should be paid on unauthorized power overflows across all neighboring systems, and not just the SPP lines. <i>(Comments of the Joint Parties, p. 7, FERC Dkt. EL14-21 &amp; ER14-1174, filed Feb. 18, 2014.)</i></p>
<p>But Basin Electric Power Co-op., an SPP member, says it fully supports SPP's position that "it is simply wrong, contractually or otherwise, to grant MISO what essential amounts to a free ride on neighboring transmission systems."</p>
<p>FERC had ruled for MISO in 2011 <i>(136 FERC ¶61,010)</i>, interpreting JOA sec. 5.2 as granting permission to MISO to share the use of SPP lines to support the Entergy deal, and had denied rehearing in 2012 <i>(138 FERC ¶61,055)</i>. Then late last year (on December 3), the D.C. Circuit vacated FERC's ruling <i>(736 F.3d 994).</i> But in sending the case back to FERC to better explain how it arrived at its findings, the court itself expressed no opinion on the merits. That left the opposing parties as they were, in their original positions, before the appellate court had acted. MISO cites that fact as cause for FERC now to reject SPP's tendered invoices. Yet that confidence rests on tender hooks.</p>
<p>On February 18, in a factsheet provided to the energy trade press and others interested in the case, MISO provided a summary of its positions on issues raised in SPP's complaint, plus an overview of a dozen or more "frequently asked questions" in Q&amp;A format. Yet this effort only highlighted the fragility of MISO's position:</p>
<p>"<i>Question 9:</i> How will this cost be recovered if FERC sides with SPP?</p>
<p>"<i>Answer:</i> If FERC indicates it will rule in favor of SPP's interpretation, MISO will engage its stakeholders.</p>
<p>"<i>Question 10:</i> But, aren't you taking a risk with you [sic] stakeholders' money?</p>
<p>"<i>Answer:</i> We understand that some stakeholders have concerns about SPP's unauthorized bills to MISO and SPP's complaint against us. We take those concerns seriously."</p>
<p><b>Islands and Paths</b></p>
<p>This case turns on a single sentence in Section 5.2 of the MISO-SPP JOA: "If the Parties have contract paths to the same entity, the combined contract path capacity will be made available for use by both Parties."</p>
<p>As applied here, the "parties" are MISO and SPP. The "same entity" is Entergy, now a MISO member. SPP says this section authorizes either RTO to share in the use of the other's line capacity only as needed to reach "external third parties" - and not so that one RTO, in this case MISO, can use that appropriated capacity to serve its own load, Entergy.</p>
<p>SPP's Monroe highlights that fact his affidavit filed January 28 with SPP's complaint:</p>
<p>"I recall internal discussions at SPP about the language of section 5.2 ... [We] understood that 'contract paths' from MISO and SPP 'to other entities' was intended to describe the ability of either party to conduct point-to-point transmission transactions to and from third-party systems that were not a part of either MISO or SPP...</p>
<p>"We certainly had no idea that MISO ... would later claim that the provision could serve as the basis of allowing ... unreserved use of SPP's transmission capacity to operate a market including both MISO's existing system and a large new member like Entergy."</p>
<p>Yet, as MISO argues, either party's internal discussions shouldn't carry much weight in arriving at the correct interpretation of sec. 5.2. Of like mind is the Louisiana Public Service Commission. Siding with MISO, the PSC has protested the SPP complaint:</p>
<p>"SPP's beliefs are of little or no assistance if those beliefs are wrong.</p>
<p>"SPP does not allege that it communicated its understanding of the contract path language with MISO until this current dispute arose long after the JOA was negotiated, signed, and approved." <i>(Protest of La.PSC, p. 5, filed Feb. 18, 2014.)</i></p>
<p>The Louisiana commission also has been working hard to try to capture benefits for its local ratepayers from Entergy's sign-up with MISO. As an example, in January, in direct response to Entergy's integration into MISO, the state commission reformulated its methods for calculating avoided-cost rates for PURPA cogeneration QFs so as to reflect zonal or (in some cases) nodal clearing prices in the new MISO day-ahead market. The PSC wants to discourage "put" sales to local Louisiana utilities bound by PURPA with a QF purchase obligation, and instead to price all those transactions in the competitive day-ahead auction. <i>(See, La.PSC Order No. U-32628-A [corrected], issued Jan. 9, 2014.)</i></p>
<p>Much of the debate at FERC and at the appeals court focused on the words "contract path." In fact, the court of appeals vacated FERC's 2011 declaratory order on the meaning of sec. 5.2 partly because it found that FERC acted arbitrarily by refusing to entertain expert witness testimony on the general meaning that the power industry ascribes to the term "contract path."</p>
<p>SPP would define that term as "a designated path over which parties engage in point-to-point transmission service transactions," implying a scheduled interchange between different ("external") third-party balancing areas. SPP's definition thus would rule out MISO's market-based flows to Entergy, a MISO member, which would arise instantaneously in real time through a bid-based dispatch and encompass only a single transmission provider balancing area, denoting network service. As SPP argues, "network service has no identified contract path."</p>
<p>But MISO would have us go beyond dictionary definitions, to examine the regulatory history of why sec. 5.2 reads the way it does.</p>
<p>As MISO explains it, sec. 5.2 of the MISO-SPP JOA was drafted specifically to mimic a very similar provision in section 6.5 contained in the MISO-PJM JOA. According to MISO, FERC approved that provision in the MISO-PJM JOA to solve the problem of a partial "islanding" of MISO's Michigan and Wisconsin areas, which had become somewhat electrically isolated from the remainder of the then Midwest ISO after the erstwhile "Alliance" companies had sided with PJM, and after Commonwealth Edison had moved its Chicago-area grid to PJM's corner.</p>
<p>According to MISO, "the commission accepted the provision as proposed by the RTOs [MISO and PJM] and, in a subsequent order, confirmed the essential purpose of sec. 6.5 as ... "addressing the weak MISO contract path capacity between Wisconsin and Michigan and the rest of MISO." <i>(Answer of MISO, p. 20, FERC Dkt. EL14-21, filed Feb. 18, 2014.)</i></p>
<p>In other words, the "weak MISO contract path capacity" [FERC's words] between Wisconsin and Michigan and the rest of MISO would be addressed, as FERC explained, "by the sharing of the RTOs' combined contract path capacity in the JOA ... which will allow Wisconsin and Michigan utilities to access the RTOs combined capability under the Midwest ISO tariff." <i>(MISO Answer, quoting from FERC's 2004 decision, at 106 FERC ¶61,250, para. 63.)</i></p>
<p>This problem, concerning MISO's need to use PJM lines to reach partially islanded areas in Wisconsin and Michigan, seems directly analogous to MISO's present need to rely on SPP capacity to reach its almost-completely islanded Entergy territories.</p>
<p>According to MISO, FERC's 2004 order interpreting the JOA with PJM "is simply irreconcilable with the SPP's 'point-to-point' interpretation."</p>
<p><b>No Harm, No Foul</b></p>
<p>SPP vs. MISO raises multiple issues fundamental to the RTO world. For example, to underpin its demands for compensation, SPP has filed a new tariff with FERC, albeit unilateral, unsigned, and unexecuted as yet, containing a stated rate to be applied to these rogue MISO flows across the SPP grid. This new tariff is called the "MISO Service Agreement," and it's where the numbers on the invoices originated. SPP describes this new tariff as defining a rate for non-firm, point-to-point transmission service provided to MISO. <i>(See, SPP Tariff Filing, FERC Dkt. ER14-1174, filed Jan. 28, 2014.)</i></p>
<p>But there's a problem. As MISO has pointed out, when FERC reformed its pro forma OATT in Order 890, it stated clearly that RTO's can't be transmission customers. Rather, they are intended to be co-equals: each a transmission provider, and each independent of markets.</p>
<p>Says MISO: "Never before was an RTO made a transmission customer of another RTO.</p>
<p>"Such an arrangement has profound negative implications for the future of these organizations."</p>
<p>Another issue concerns loop flows - the incidental, unintentional overflows onto parallel paths that are inevitable under the laws of physics.</p>
<p>MISO argues that FERC always intended that RTOs resolve loop flows amicably, through JOA negotiations. In fact, in FERC Order 1000, governing regional transmission planning, the commission said its policy on loop flows implores caution "against the hasty submittal of ... unilateral filings and prefers resolution of parallel path flow issues on a consensual, regional basis."</p>
<p>SPP counters, however, that these MISO power overflows can't be classified as incidental, since any engineer should know you can't serve 27,000 MW of load through a 1,000-MW pipe. Thus, in SPP's view, FERC's policy on loop flows shouldn't apply, meaning that its hasty submittal of unilateral filings is perfectly proper.</p>
<p>But now we must get technical, delving into the RTO world of cross-border congestion management, including RCFs, or "reciprocal coordinated flowgates." MISO explains, describing the RTO-to-RTO congestion management process (CMP) and its more advanced cousin, the ICP, or interregional coordination process:</p>
<p>"The use of RCFs under the JOA allows the parties to maximize transmission system utilization by permitting reciprocal use up until congestion occurs, with the parties then returning to their allocation based on historic use.</p>
<p>"Available shared contract path capacity is efficiently used under normal operating conditions, but can be 'turned back' when congestion requires flow reductions to ensure that the owner of the capacity is able to serve its firm loads." <i>(See, MISO Answer, pp. 44-45, FERC Dkt. EL14-21, filed Feb. 18, 2014.)</i></p>
<p>In other words, no harm, no foul.</p>
<p>MISO maintains that the excess power flows it has placed on SPP's grid are simply making use of transmission capacity that's there for the taking, as the MISO flows won't be imposing any congestion on SPP's native load:</p>
<p>"If congestion develops on an SPP flowgate, MISO will reduce the impact of these flows ... if no congestion is present, these flows are tolerated in exchange for the benefits of networked interconnection.</p>
<p>"It is a quibble how the flows are described... SPP does not allege that it is unable to sell transmission service, or has experienced increased congestion ... suffered any other harm that would justify compensation or penalties." <i>(MISO Answer, pp. 47-48, FERC Dkt. EL14-21, filed Feb. 18, 2004.)</i></p>
<p>And that's Xcel's take as well:</p>
<p>"There is no suggestion in this case that the flows at issue are firm schedules serving firm loads that 'bump' SPP's firm use of its own system." <i>(Xcel comments, p. 8.)</i></p>
<p>But listen to the SPP transmission owners themselves, commenting on the dispute, who offer up some of the most remarkable prose ever found in a FERC proceeding:</p>
<p>"SPP's transmission system is not a fallow field awaiting planting from the first person willing to scatter some seeds."</p>
<p><b>Nosey Neighbors</b></p>
<p>Though it remains absolutely confident of the rightness of its cause, the Midcontinent ISO has taken the unusual step of answering SPP's complaint and invoices with a complaint of its own <i>(MISO v. SPP, FERC Dkt. EL14-30, filed Feb. 18, 2014),</i> in which it has warned that SPP's actions are "casting a financial cloud over the MISO markets."</p>
<p>That cloud concerns ORCA, the "Operations Reliability Coordination Agreement" proposed by MISO and OK'd by FERC last fall. Parties to the agreement include MISO, plus various neighboring utility systems other than SPP, known under ORCA as the "Joint Parties," that might also be affected by MISO's flows to Entergy, such as TVA and the Southern Company <i>(See, Dkt. ER13-2162, Oct. 10, 2013, 145 FERC ¶61,032.)</i></p>
<p>MISO now claims that it has received three "nearly identical letters," from three of the ORCA signatories - TVA, LG&amp;E-KU, and one very small utility, Associated Electric Co-op, Inc. (AECI), which has figured prominently in the Entergy integration.</p>
<p>AECI, which serves Missouri's "Boot Heel" district near earthquake-prone New Madrid, is the reason that MISO member Ameren maintains its 1,000-MW link to Entergy-Arkansas. According to MISO, in the letters the three utilities threaten to renege on their ORCA obligations to work with MISO to manage power flows to Entergy.</p>
<p>As MISO has explained, ORCA establishes an "operations transition period," during which time MISO will limit its directional market flows between the new MISO South Region (Entergy) and MISO Midwest, its prior historical footprint. North-to-South flows are defined as "negative"; South-to-North flows are "positive." OTP Phase 1 (ending April 2014) limits total net flows (positive minus negative) to 2,000 MW. Phases 2 and 3 retain that limit but add a few wrinkles, such as testing and validation of flow effects. But after OTP Phase 3 ends, on April 1, 2015, the 2,000-MW flow limit in ORCA falls away, allowing higher flows.</p>
<p>Nevertheless, those three nearly identical letters threaten to tear up the ORCA provisions. According to MISO, in spite of the ORCA limit of 2,000 MW, the letters from TVA, AECI, and LG&amp;E-KU demand that MISO limit its region-to-region flows to 1,000 MW, the capacity of the physical tie. TVA's letter, in fact, says it "reserves the right to charge MISO for any use of unreserved capacity on the TVA transmission system if MISO transfers exceed the 1,000-MW contract path limitation."</p>
<p>To MISO's eyes, these three joint parties have now sided with SPP. They base their demand, says MISO, on the idea that the D.C. Circuit order settled the case in favor of Southwest Power Pool, rather than simply sending the issue back to FERC.</p>
<p>On January 29, in a presentation to the ORCA Reliability Subcommittee, MISO had acknowledged that recent extreme cold conditions in the Northeast had given rise to an "unusual level of Northeast imports," resulting in large parallel flows across the TVA system, which might limit its ambitions to increase south-north and north-south flows.</p>
<p>But barring that, MISO suggested in that same presentation that once the ORCA limit expires, there ought to be an additional 4,800 to 5,400 MW of additional transfer capability between MISO-Midwest and MISO-South, on top of flows that are occurring now in compliance with the Phase 1 ORCA limit of 2,000 MW.</p>
<p>In other words, by spring of next year, SPP could be looking at MISO dispatch flows between its Midwest and Entergy regions totaling seven times the capacity of the actual physical tie.</p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/ferc">FERC</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/commission-watch">Commission Watch</a></li><li class="taxonomy-term-reference-2"><a href="/article-categories/etrm-markets">ETRM &amp; Markets</a></li><li class="taxonomy-term-reference-3"><a href="/article-categories/transmission">Transmission</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/commission-watch">Commission Watch</a></li></ul></div><div class="field field-name-field-image-picture field-type-image field-label-above"><div class="field-label">Image Picture:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="https://www.fortnightly.com/sites/default/files/1403-CW.jpg" width="360" height="180" alt="" /></div></div></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
<div class="field-items">
<a href="/tags/southwest-power-pool">Southwest Power Pool</a><span class="pur_comma">, </span><a href="/tags/miso">MISO</a><span class="pur_comma">, </span><a href="/tags/carl-monroe">Carl Monroe</a><span class="pur_comma">, </span><a href="/tags/midcontinent-independent-system-operator">Midcontinent Independent System Operator</a><span class="pur_comma">, </span><a href="/tags/sp-0">SP</a><span class="pur_comma">, </span><a href="/tags/entergy">Entergy</a><span class="pur_comma">, </span><a href="/tags/open-access-0">open-access</a><span class="pur_comma">, </span><a href="/tags/oatt">OATT</a><span class="pur_comma">, </span><a href="/tags/joa">JOA</a><span class="pur_comma">, </span><a href="/tags/federal-energy-regulatory-commission">Federal Energy Regulatory Commission</a><span class="pur_comma">, </span><a href="/tags/xcel-energy">Xcel Energy</a><span class="pur_comma">, </span><a href="/tags/tva">TVA</a><span class="pur_comma">, </span><a href="/tags/southern-company">Southern Company</a><span class="pur_comma">, </span><a href="/tags/basin-electric">Basin Electric</a><span class="pur_comma">, </span><a href="/tags/ferc">FERC</a><span class="pur_comma">, </span><a href="/tags/louisiana">Louisiana</a><span class="pur_comma">, </span><a href="/tags/network">Network</a><span class="pur_comma">, </span><a href="/tags/contract-path">contract path</a><span class="pur_comma">, </span><a href="/tags/wisconsin">Wisconsin</a><span class="pur_comma">, </span><a href="/tags/michigan">Michigan</a><span class="pur_comma">, </span><a href="/tags/rcp">RCP</a><span class="pur_comma">, </span><a href="/tags/reciprocal">reciprocal</a><span class="pur_comma">, </span><a href="/tags/flowgate">flowgate</a><span class="pur_comma">, </span><a href="/tags/congestion">Congestion</a><span class="pur_comma">, </span><a href="/tags/cmp">CMP</a><span class="pur_comma">, </span><a href="/tags/orca">ORCA</a><span class="pur_comma">, </span><a href="/tags/reliability">Reliability</a><span class="pur_comma">, </span><a href="/tags/coordinating">coordinating</a><span class="pur_comma">, </span><a href="/tags/lge-ku">LG&amp;E-KU</a><span class="pur_comma">, </span><a href="/tags/aeci">AECI</a> </div>
</div>
Mon, 03 Mar 2014 01:15:55 +0000meacott17070 at https://www.fortnightly.com